The Allahabad High Court Division Bench of Justice Sunita Agarwal and Justice Vipin Chandra Dixit is to examine whether the Rule 96(10)(b) of the Central Goods and Services Tax (CGST) Rules, 2017 is in ultra vires or within the limits of Section 16(3)(b) of the Integrated Goods and Services Tax (IGST) Act, 2017.
The contention of the petitioner in the writ petition filed is that the prohibition under Rule 96(10)(b) of the CGST Rules, 2017 which has been brought into effect from 9.10.2018 is in contravention of the enabling provision under Section 16(3)(b) of the IGST Act, as it curtails the right conferred under the Act.
Zero Rated Supplies include supplies to the Special Economic Zone(SEZ) and exports. By zero rating it is meant that the entire value chain of the supply is exempt from tax. This means that in case of zero rating, not only is the output exempt from payment of tax, there is no bar on taking/availing credit of taxes paid on the input side for making/providing the output supply. Such
an approach would in true sense make the goods or services zero rated.
The petitioner has contended that as the rules are laid down in violation of the act, or enabling provision, the demand claimed by the petitioner cannot be held to be illegal; and since the claim of the assessee is not illegal, the notice issued to the petitioner for the recovery of refund claimed is illegal.
The High Court directed the counsels appearing for the respondents to file counter affidavits within two weeks and renotified the matter to be heard on a later date to examine the issue of vires of the Rule 96(10)(b) of the CGST Rules, 2017.
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